For Immediate Release
Chicago, IL – April 27, 2010 – Zacks Equity Research highlights Union Pacific Corp. (UNP) as the Bull of the Day and Nippon Telegraph & Telephone (NTT) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Caterpillar Inc. (CAT), Humana Inc. (HUM) and Whirlpool Corporation (WHR).
Full analysis of all these stocks is available at http://at.zacks.com/?id=5506
Here is a synopsis of all five stocks:
Given the robust signs of fundamental improvement, we are upgrading our recommendation on Union Pacific Corp. (UNP) to Outperform. The company’s first-quarter earnings were well ahead of the Zacks Consensus Estimate. Results were also favorable compared with the prior-year quarter.
Earnings benefited primarily from increased operating revenues due to growth in business volumes. However, higher operating expenses, primarily as a result of increased fuel costs and depreciation, marred the earnings growth to a great extent. We expect the top line to benefit from strong pricing with the gradual recovery of the economy.
Cost containment measures, along with initiatives to improve operating efficiency, also augur well. However, labor cost inflation and increasing depreciation expense are expected to drag future profitability.
We downgrade our recommendation for Nippon Telegraph & Telephone (NTT) to Underperform ahead of its fourth quarter of fiscal 2010 financial results.
We remain concerned regarding the less-than-anticipated sales of mobile handsets due to weak economic conditions in Japan, together with significant declines in ARPU, as subscribers migrate to discounted service plans. The company is facing intense pricing pressure from smaller telecom service providers.
KDDI and Softbank are gradually improving their mobile networks with 3G/4G technologies. Near saturation of the Japanese wireless market also remains a major problem. Severe competition together with Nippon’s leveraged balance sheet may restrict higher valuation levels over the near-term.
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Caterpillar Outperforms
Caterpillar Inc. (CAT) reported encouraging results for the first quarter of fiscal 2010 with EPS of 50 cents from 39 cents in the year-ago quarter. Net earnings were $233 million, up from $230 million in the first quarter of fiscal 2009.
The increase was driven by a decline in operating costs. Reported EPS surpassed the Zacks Consensus Estimate of 39 cents.
In response to the challenging global business environment, Caterpillar has been implementing aggressive cost-cutting initiatives since 2009. The company has reduced its workforce significantly. Also, the company has implemented full or partial shutdowns at some of its plants, delayed its R&D programs and reduced its capital expenditure substantially. These actions helped the company reduce its manufacturing costs by $566 million in the first quarter.
Humana Tops, Raises Guidance – Shares Dip
Humana Inc. (HUM) reported first quarter fiscal 2010 earnings (excluding special items) of $1.19 per share above the Zacks Consensus Estimate of $1.14. The company earned $1.22 for the year-ago quarter.
The adjusted earnings were at the higher end of guidance provided by the company. For the first-quarter of 2010, Humana expected to earn between $1.10 and $1.20 per share.
For the second-quarter of 2010, Humana expects to earn between $1.65 and $1.70 per share. The Zacks Consensus Estimate for the next quarter is $1.44. For fiscal 2010, the company has raised its outlook. It now expects to earn within $5.55 – $5.65 per share, compared to its previous guidance of $5.15 to $5.35 per share. The Zacks Consensus Estimate for fiscal 2010 is $5.52.
Furthermore, the company expects consolidated revenues in the range of $33.5 billion and $34.5 billion in 2010, compared to the prior outlook of $33 billion – $34 billion.
Even though the first quarter fiscal 2010 results were favorable based on strong earnings from the Government segment, we remain concerned about the weakness in the Commercial segment, whose membership fell 4% year-over-year. We currently have a Neutral outlook on Humana for the long-term implying that it will perform in line with the overall U.S. equity market over the next six to twelve months. We advise investors to retain the stock over that time period.
Whirlpool Profits More than Triple
Whirlpool Corporation (WHR) revealed a more than threefold increase in profit to $2.51 per share (before special items) in the first quarter, compared to 73 cents (before special items) a year ago. The manufacturer of home appliances also outperformed the Zacks Consensus Estimate of $1.30 per share.
Sales in the quarter rose 20% to $4.3 billion. Excluding the impact of foreign exchange translation, the increase was 11%. Unit shipments increased 18% globally. The adjusted operating profit went up to $287 million from $126 million in the previous year.
The improvement in results was due to an increase in unit shipments, cost reduction actions and initiatives to enhance productivity. These favorable factors were partially offset by a lower product price/mix.
Whirlpool raised its earnings per share guidance to $8.00–$8.50 for full year 2010, compared to its prior guidance of $6.50–$7.00.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.
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